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Mortgage in arrears often occurs when a borrower gets into financial strife due to illness, job loss, divorce or other unexpected situations and is unable to meet their mortgage repayments.

If you have missed, late or overdue repayments on your mortgage, then it could affect your chances of refinancing or obtaining a new loan in the future.

Lenders need to be able to see that you can afford the mortgage repayments, so past repayment problems could mean you are ineligible for future home loans.

What should I do if I start to fall behind on repayments?

If you find that you are struggling to meet repayments, don’t keep it to yourself. It is important that you speak with your lender as soon as possible. If you are able to notify your lender before you default on a repayment, they may be able to provide you with alternative options. However, if you keep your lender in the dark, they may be less willing to help you.

Each lender may have a different process for dealing with repayment defaults, but usually, a lender will take action after two missed repayments if you’ve borrowed more than 80% and three or more missed repayments if you borrowed less than 80%. If you do not communicate with your lender it could result in your property being repossessed.

Can I refinance if I have a mortgage in arrears?

Depending on your situation, you may be able to refinance your mortgage to a different lender. However, due to the arrears, you may not be eligible for a prime loan and may have to take out a specialist product with certain provisions. These provisions could include:

• Higher interest rates

• Risk fees

• Lenders Mortgage Insurance (if borrowing over 80% of the purchase price)

It is important that you find a lender who offers specialised loans as they will be able to help you find the right loan to suit your circumstances. Even if you are not able to apply for a standard prime loan, you can still get a specialised loan with a competitive interest rate from the right lender.

Need help with refinancing your home loan?

If you are finding the above confusing then don't despair. State Custodians have experienced lending specialists who can do the calculations for you and discuss which home loan options would be right for you. Just call on 13 72 62.